Bill H.B. 2135
This bill would amend the Kansas Unemployment Security law by creating a new provision regarding classification of workers such that the Secretary of Labor (“Secretary”) shall first seek to determine whether the business in question has a reasonable basis upon which it relied when it determined the classification of a worker as an employee or independent contractor. If a reasonable basis is found, the classification shall be deemed valid.
A business has a reasonable basis for its classification of workers
- if any of the following circumstances are present:
(A) the business reasonably relied upon a judicial decision regarding employment classification matters rendered by a federal or state court of competent jurisdiction in the state of Kansas;
(B) the business previously received a ruling from the Internal Revenue Service, the Department of Revenue, or the Department of Labor validating the business’ classification of workers;
(C) the business has been previously audited by the Internal Revenue Service, the Department of Revenue, or the Department of Labor at a time when the business classified workers similarly situated in the same manner to those workers currently in question, and such audit did not result in reclassification of those workers so similarly situated; or
(D) the business reasonably relied on the application of worker classifications customary among a significant segment of its industry; and - the business showed consistency in its practices by:
(A) the business classified the worker in question and any similarly situated worker in the same manner; and
(B) the business has consistently and properly reported to the appropriate taxing authorities wages or payments to the workers in question and those similarly situated.
If a reasonable basis cannot be ascertained, then when making a determination the Secretary shall then consider the following factors:
(1) Must the individual comply with specific instructions from the business regarding when, where, and how to perform services so provided?
(2) Are the activities of the individual integrated into the ongoing operations of the business?
(3) If needed to accomplish the desired end result, does the individual have the responsibility to hire, supervise and pay assistants?
(4) Must the individual work exclusively for the business in question?
(5) Is payment by the business to the individual for services contingent on completion of established benchmarks or tasks?
(6) Does the individual provide significant tools, materials or other equipment used in the accomplishment of the desired end result?
(7) Is the individual responsible for any expenses incurred in the performance of services?
(8) Can the individual suffer a loss in the course of performing services?
The bill also clarifies the general test for “employment,†such that services performed by an individual for wages or under any contract of hire shall be deemed to be employment subject to this Kansas Unemployment Security law if the business for which activities of the individual are performed retains not only the right to control the end results of the activities performed, but the manner and means by which the end result is accomplished.
The bill provides that no person shall knowingly and intentionally misclassify an employee as an independent contractor for the sole or primary purpose of avoiding either state income tax withholding and reporting requirements or state unemployment insurance contributions reporting requirements. First violations are subject to a civil penalty, and second violations are punishable as a Class C nonperson misdemeanor and subject to a civil penalty, and third and subsequent violations are punishable as a Class A, nonperson misdemeanor and also subject to a civil penalty.
